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ACC - Accrual- and Cash-Basis Revenue




Question;1. Accrual- and Cash-Basis RevenueMagnani Music sells used CDs for $2.00 each. During the month of April, Magnani sold 8,750 CDs for cash and 15,310 CDs on credit. Magnani's cash collections in April included the $17,500 for the CDs sold for cash, $10,300 for CDs sold on credit during the previous month, and $9,850 for CDs sold on credit during April.2. Speedy Delivery Company provides next-day delivery across Eastern Canada. During May, Speedy incurred $132,600 in fuel costs. Speedy paid $95,450 of the fuel cost in May, with the remainder paid in June. In addition, Speedy paid $15,000 in May to another fuel supplier in an effort to build up its supply of fuel.3. The following information describes transactions for Morgenstern Advertising Company during July:On July 5, Morgenstern purchased and received $24,300 of supplies on credit from Drexel Supply Ltd. During July, Morgenstern paid $20,500 cash to Drexel and used $18,450 of the supplies.Morgenstern paid $9,600 to salespeople for salaries earned during July. An additional $1,610 was owed to salespeople at July 31 for salaries earned during the month.Paid $2,950 to the local utility company for electric service. Electric service in July was $2,300 of the $2,950 total bill.for 1-3 question required:Calculate the amount of revenue recognized in April under the cash basis of accounting.Calculate the amount of revenue recognized in April under the accrual basis of accounting.4.Accrual- and Cash-Basis Expense RecognitionThe following information is taken from the accrual accounting records of Kroger Sales Company:During January, Kroger paid $9,150 for supplies to be used in sales to customers during the next two months (February and March). The supplies will be used evenly over the next two months.Kroger pays its employees at the end of each month for salaries earned during that month. Salaries paid at the end of February and March amounted to $4,925 and $5,100, respectively.Kroger placed an advertisement in the local newspaper during March at a cost of $850. The ad promoted the pre-spring sale during the last week in March. Kroger did not pay for the newspaper ad until mid-April.Required:1. Under cash-basis accounting, how much expense should Kroger report for February and March?February $_____March $_____2. Under accrual-basis accounting, how much expense should Kroger report for February and March?February $____March $_____3. Conceptual Connection: Which basis of accounting provides the most useful information for decision makers?Why?


Paper#40048 | Written in 18-Jul-2015

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